Web Strait’s Finance

I think most of the investors like fund’s distributions/devidends. Sincerely, I would like it too. Because only the funds with good performance can make the distributions to it’s unit’s holders (based on rules). That means distributions will some how hints that you are investing in a fund with good performance. But how far that you will really be benefial from it?

Most of investors think that a distribution is something like a “bonus” from the fund invested. But this is exactly wrong in the sense that your fund’s market value is still the same after the distribution. On the other hand, some Unit Trust Agents have been over emphasized on the “more units” that you will gain from the distribution without explaining to their investors that the Fund’s NAV (i.e. Net Asset Values) will also drops by the same amount, which ends up with the same market value. How does it happens?

For example, you had invested in a fund ABC and hold about 5000 units. On 21st June 2006, the NAV per unit for this fund ABC is RM1.00. That means your market value is now RM5000 (i.e. 5000 units x RM1.00). Lets say that the fund’s institution had declared a distribution of 10 cents on 21st June 2006 for fund ABC. This will make you get an extra of 555.55 units, that means you are now have about 5555.55 (i.e. 5000 units/90 cents) instead of 5000 units. Ok, as you seeing from this stage, this is really good to the investors in the sense that the total units held had been increased from 5000 units to 5555.55 units. However, you should not too happy about the increment of the units held. Because the NAV per unit for this fund ABC will also drop at the same time to RM0.90. As a result, your market values of fund ABC will be still the same, i.e. 5555.55 units x RM0.90 = RM5000. Hence, there is no distinct advantage that you would get from the fund’s distribution!

I hope that you will now have a clearer picture regarding the distributions of unit trust’s fund. As my advice, you should know what is the involving rules and tricks first, before involving in any investment. This is akin to you must know the rules of game before start to play the game.

“What are the differences between wants and needs?” How likely your answer would be? Sincerely, it would not be too important if you can get the correct answer. You would probably answer such question correctly; even a school boy may know the answer.

Basically, “needs” refers to those things required for surviving. While “wants” refers to something that can improve our life quality(Not required for surviving). But, “How far that you are able to differentiate between wants and needs in your real life?” Once upon a time, there were a lot of people who queued up since 6am morning or even earlier for buying the “limited edition” Hello Kitty dolls. Hence, I dare not to say that the Hello Kitty dolls wasn’t a need for them(Even though I know that we won’t die without the Hello Kitty dolls).

There is no denying that all of us are now living in an era that full of temptations or “traps” set by the businessmen. Hence, the costs of living are now getting higher and higher. Most of the time, you may try your best in finding more sources of income, but never know how to “protect” your money. Anyway, “If You Don’t Know How To Take Care Of Your Money, Some Body Else(i.e. the businessmen) Will Do”.

Actually, knowing how to differentiate and manage your “needs” and “wants” in the daily life is as crucial as knowing how to manage a soccer team during a match. A great coach should know that they need a win, and they want to score more goals. There is no point for scoring 3 goals but losing the match by 3:4 at the end. Hence, please bear in mind that a good soccer team does not necessary be a team that can score many goals. But, it must be a team in which can win many matches. Think about it!

After dropping badly for several transaction days, KLCI had started to increase in last tuesday (i.e. 6th, March). Furthermore, KLCI had continued it’s rise on wednesday and the following transaction days of last week (i.e. from 7th to 9th of March). Anyway, such rising trend may not be able to last in this week.

From the graph shown above, we can see that was just a narrow increment on friday compared with those relatively much larger increments on tuesday(6-Mar-07), wednesday(7-Mar-07) and thursday(8-Mar-07). That means most of the investors had started to worry about the market’s adjustment that would happen anytime and took a wait-and-see stance for the time being. Hence, investors are advised to be more aware of this sentiment. All in all, there were most of the market analysts expect that profit taking corrections should arise in this week.

The nightmare seems still haven’t ended yet, most of the markets in Asia fell sharply on this Monday. Hong Kong - Hang Seng dropped 777.13 points (or 4.00%) to 18664.88, Japan - Nikkei 225 index fell 575.68 (or 3.34%) to 16642.25, U.S. - Dow Jones fell 120.24 (or 120.24) to 12114.10, Taiwan down 285.59 (or 3.74%) to 7344.56, and Singapore - STI fell 96.45 (or 3.13%). Besides, KLCI of Malaysia fell for sixth day to 1110.69, i.e. KLCI had dropped 53.99 (or 4.64%). By the way, KLCI was the market that had dropped worst in terms of percentages i.e. about 4.64%. The following chart shows KLCI’s performance for the latest transaction days.

As you can see from the graph above, KLCI had dropped 162.18 points within 5 transacton days. Analysts said global stocks fall reflect underling concern that the U.S. and Chinese economies will turn weaker. Besides, Japan’s yen expected to continue going high against the dollar in which may caused so called yen “carry trades” and hurt the liquidity of the market. Hence, investors are advised not to enter the stock markets now and should take a wait-and-see stance for the time being.

All in all, the market will need at least one month to see a stock rebound as the investors need time to regain their confidence against their markets.